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Harvia’s Interim Report 1 January – 30 September 2021

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Harvia Plc, Interim report 4 November 2021 at 9.00 a.m. EET


Harvia Q3: Strong growth and excellent profitability continued

This release is a summary of Harvia Plc’s Interim Report January–September 2021. The complete report is attached to this release as a pdf file. It is also available on Harvia’s website at https://harviagroup.com/.

Highlights of the review period

July–September 2021:

  • Revenue increased by 65.1% to EUR 46.2 million (28.0). At comparable exchange rates, revenue increased by 65.4% to EUR 46.3 million. On top of very strong organic revenue growth of 42.5%, Harvia enjoyed substantial revenue growth due to acquisitions.

  • Adjusted operating profit increased to EUR 11.8 million (6.1), making up 25.5% (21.8) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 11.6 million (25.2% of the revenue).

  • Operating profit was EUR 11.6 million (6.0), making up 25.1% (21.4) of the revenue.

  • Operating free cash flow amounted to EUR 4.4 million (7.9) and cash conversion was 32.9% (106.9%). EUR 2.5 million (1.0) investments in expanding capacity and improving productivity as well as EUR 6.6 million increase of net working capital decreased the operating free cash flow and cash conversion in the third quarter.

  • On 31 August 2021, Harvia signed and closed an agreement to acquire Sauna-Eurox Oy, one of the world’s largest suppliers of safe and durable sauna stones, and its sister company Parhaat Löylyt Oy. The financial figures have been consolidated with Harvia’s figures starting from 31 August 2021.

January–September 2021:

  • Revenue increased by 79.6% to EUR 132.6 million (73.9). At comparable exchange rates, revenue increased by 83.0% to EUR 135.2 million. Organic growth was strong at 53.9%. The impact of acquisitions on growth was substantial, as well.

  • Adjusted operating profit increased to EUR 36.1 million (15.7), making up 27.2% (21.2) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 37.0 million (27.3% of the revenue).

  • Operating profit was EUR 35.5 million (13.7), making up 26.8% (18.5) of the revenue.

  • Operating free cash flow amounted to EUR 16.6 million (18.3). EUR 8.0 million (1.7) investments in expanding capacity and improving productivity as well as EUR 15.8 million increase of net working capital decreased the operating free cash flow and cash conversion. The acquisitions during January–September 2021 were paid out of the company’s cash reserves.

  • Net debt amounted to EUR 38.9 million (36.3) and leverage was 0.8 (1.5).

  • Equity ratio was 41.4% (42.2).

  • On 28 May 2021, Harvia signed and closed an agreement to acquire Kirami, a leading Finnish still water hot tub manufacturer and pioneer in wood-heated hot tubs globally. The financial figures of Kirami have been consolidated with Harvia’s figures starting from 28 May 2021. On 31 August 2021, Harvia signed and closed an agreement to acquire Sauna-Eurox Oy, and its sister company Parhaat Löylyt Oy. The financial figures have been consolidated with Harvia’s figures starting from 31 August 2021.

  • Harvia has taken special measures in all operating countries to ensure the safety of its personnel and safeguard the continuity of its operations and services in the exceptional situation caused by the COVID-19 pandemic. Despite the pandemic, we have maintained our operative and customer service capabilities close to their regular level.

Key figures

EUR million

7-9/
2021

7-9/
2020

Change

1-9/
2021

1-9/
2020

Change

1-12/
2020

Revenue

46.2

28.0

65.1%

132.6

73.9

79.6%

109.1

EBITDA

13.3

7.3

82.4%

39.8

16.8

136.7%

26.7

% of revenue

28.7%

26.0%

30.0%

22.8%

24.5%

Items affecting comparability *

0.2

0.1

66.7%

0.6

2.0

-70.4%

2.1

Adjusted EBITDA **

13.4

7.4

82.1%

40.4

18.8

114.6%

28.8

% of revenue

29.1%

26.4%

30.5%

25.5%

26.4%

Operating profit

11.6

6.0

93.6%

35.5

13.7

160.0%

22.4

% of revenue

25.1%

21.4%

26.8%

18.5%

20.5%

Adjusted operating profit **

11.8

6.1

93.1%

36.1

15.7

130.5%

24.4

% of revenue

25.5%

21.8%

27.2%

21.2%

22.4%

Basic EPS (EUR)

0.44

0.22

104.2%

1.37

0.52

165.3%

0.83

Operating free cash flow

4.4

7.9

-43.9%

16.6

18.3

-9.4%

28.7

Cash conversion

32.9%

106.9%

41.1%

97.4%

99.7%

Investments in tangible and intangible assets

-2.5

-1.0

136.1%

-8.0

-1.7

364.8%

-2.6

Net debt

38.9

36.3

7.2%

38.9

36.3

7.2%

31.9

Leverage

0.8

1.5

0.8

1.5

1.1

Net working capital

36.7

19.7

85.7%

36.7

19.7

85.7%

18.0

Adjusted return on capital employed (ROCE)

112.4%

54.9%

112.4%

54.9%

73.3%

Equity ratio

41.4%

42.2%

41.4%

42.2%

42.0%

Number of employees at end of period

810***

587

38.0%

810***

587

38.0%

617


* Consists of items outside the ordinary course of business, relating to the Group’s strategic development projects, acquisitions, restructuring expenses and loss on sale of fixed assets, and affecting comparability.

** Adjusted by items affecting comparability.

*** Includes the personnel of Kirami and Sauna-Eurox, totaling 70 employees on 30 September 2021.

Financial targets and outlook

Harvia targets an average annual revenue growth of more than 5%, an adjusted operating profit margin exceeding 20% and a net debt/adjusted EBITDA between 1.5x−2.5x in the long term. The future impacts of changes in IFRS reporting standards have been excluded in the net debt/adjusted EBITDA ratio target.

The company has set long-term targets related to growth, profitability and leverage. The company’s management estimates that due to the special circumstances caused by the COVID-19 pandemic, the sauna and spa market has experienced exceptionally high demand. This, however, is not expected to have an impact on the long-term growth expectations of the sauna and spa market, nor on Harvia’s long-term targets.

Harvia does not publish a short-term outlook.

Harvia targets a regularly increasing dividend with a bi-annual dividend payout of at least 60% of Group net income, in total.

Tapio Pajuharju, CEO:

I’m very proud of Team Harvia performance. Our Q3 performance of strong topline growth with excellent profitability is a clear proof of plans well executed together with our customers and partners. I would like to pass my personal humble thanks to everyone for their fantastic effort in the rather special supply environment. Thank you for the great work!

The underlying market demand has been favorable in all product categories and all main markets. The strong performance indicates also that Harvia has been successful in gaining market share. Total net sales growth amounted to 65.1% (EUR 18.2 million) in the third quarter, of which a good 42.5% was truly organic. The rest was generated by our recent acquisitions.

We are very happy that our adjusted operating profit was excellent, and landing at EUR 11.8 million, nearly doubling from the EUR 6.1 million in the previous year’s third quarter. Our relative profitability also landed well at 25.5%.

All of our production units have been performing well and with excellent capacity utilization. Harvia’s supply chain has done excellent proactive work, and despite all the prevailing challenges in the availability of raw materials and electronics as well as logistic issues and climbing prices, we have been able to operate in very close to normal conditions. We have been intentionally increasing the buffer stocks of critical raw materials and componentry. This has paid off very well. However, availability of sauna rooms has been and continues to be an issue in Europe, and lead times have remained longer than normal. The price inflation seems to continue, but in close cooperation with our customers and suppliers, we have been able to find ways to address this.

Our focused actions in Central Europe and Germany have been successful, which is clearly visible in the figures. Our recent acquisition, EOS Group, and especially the EOS team, has continued its strong performance in the premium and professional category. On top of this, we have been progressing very well in the Scandinavian market, where we have been able to challenge the local market leader. The US continued on a good growth path, yet slightly below the overall growth of the group. This is due to the lower sauna sales during the hot summer period and our actions to transition the US operations to the new factory with expanded capacity and capability in Lewisburg, West Virginia. Globally, all product groups grew well, yet sales growth in the combination of sauna rooms and hot tubs was particularly high at 147%, or EUR 7.4 million.

The recently acquired Scandinavian still-water hot tub manufacturer Kirami is clearly boosting our “backyard paradise” offering and has been performing well. The integration is proceeding according to plan and with very good spirit. For some time, the market has been lacking full access to sustainable, high-quality and safe sauna stones, which is why we acquired Sauna-Eurox, the leading maker of sauna stones in the field. Joining forces is opening new avenues that will benefit the whole industry.

Our operations continued their solid performance, and the ongoing substantial investments are on schedule and on budget. On top of the already agreed investments, we have made a decision to further expand our Romanian sauna factory, as well as increase the machine capacity at the EOS factory in Driedorf, Germany. The total amount of investments during 2021 will be landing at EUR 10–11 million. Harvia’s cash conversion in operations has remained good, but during the third quarter, there was a substantial impact of investments and increased net working capital.

During the remainder of the year, we will remain fully focused on the cornerstones of our strategy by working on increasing the value of the average purchase, geographical expansion, and continuous improvement of productivity. General M&A activity in the sauna and spa market remains high. As stated in our strategy, we continue to seek opportunities to grow in the sauna and spa market organically and through M&A.

We maintain the general outlook for the market and foresee that for some time, market growth will exceed the historical average. However, we continue to estimate that part of the growth is so-called advance demand and is not expected to affect the long-term expectations of the sauna and spa market.

Press conference on financial results

Harvia will hold a webcast for analysts, investors and media on 4 November 2021 at 11:00 a.m. EET. The conference will be held in English. Harvia’s CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event. The webcast can be followed at https://harvia.videosync.fi/2021-q3-results/.

You can also participate in the conference by calling:

Finland: +358 9 8171 0310
Sweden: +46 856 642 651
UK: +44 333 300 0804
US: +1 631 913 1422

PIN: 38829315#

A recording of the webcast will be available later at the company’s website https://harviagroup.com/investor-relations/.

For more information, please contact:

Tapio Pajuharju, CEO, tel. +358 50 5774 200
Ari Vesterinen, CFO, tel. +358 40 5050 440

Harvia is one of the leading companies operating in the sauna and spa market globally, as measured by revenue. Harvia’s brands and product portfolio are well known in the market, and the company’s comprehensive product portfolio strives to meet the needs of the international sauna and spa market of both private and professional customers.

Harvia’s revenue totaled EUR 109.1 million in 2020. Harvia Group employs more than 800 professionals in Finland, China and Hong Kong, Romania, Austria, United States, Germany, Estonia and Russia. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.

Read more: https://harviagroup.com

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